Assume That Two Countries (Home and Foreign) Each Produce Two

Multiple Choice

Assume that two countries (Home and Foreign) each produce two goods (corn and wheat) under constant cost production. Home produces 1/2 ton of corn or 1 ton of wheat with a day of labor. Foreign produces 1 ton of corn and 1/2 ton of wheat. Suppose that, after trade occurs, the international price actually becomes 1.5 tons of wheat per ton of corn. Which of the following statements is true?

A) Home will gain from trade but Foreign will not.
B) Foreign will gain from trade but Home will not.
C) Neither home nor Foreign will gain from trade.
D) Both Home and Foreign will gain from trade.